Taxpayers, quite commonly, have to deal with an IRS examiner asking them to “waive the statute of limitations” during an audit. In practice, the IRS typically asks you to sign a written consent that extends the time the IRS has to assess additional tax for a specific tax year. The default rule generally gives the IRS three years after a return is filed to assess additional tax, but the law contains several important exceptions, including more extended periods in substantial omission cases and no time limit when fraud exists or when you never filed a return. When the IRS asks for an extension, you do not have to agree, and the law requires the IRS to notify you that you can refuse or limit the extension to particular issues or a particular period of time.
You should treat the request as a strategic decision, not as a routine formality. Signing a consent can help you if you need time to assemble records, develop a coherent position, and pursue administrative resolution without facing a rushed Notice of Deficiency. Refusing can also make sense, particularly when you see criminal tax risk, and you want to minimize the time the government has to develop a civil fraud narrative. You should make that decision with a clear understanding of what the consent does, what it does not do, and how it intersects with criminal tax exposure.
What the IRS is Actually Asking You to Sign
Most IRS audit statute extensions fall under Internal Revenue Code section 6501(c)(4). That provision allows the IRS and the taxpayer, before the normal limitations period expires, to consent in writing to extend the time for assessment beyond the normal expiration date, and it enables additional extensions if both parties sign before the prior extension expires. The IRS typically uses a fixed date consent, commonly Form 872, that extends the assessment period to a specified date. In some settings, the IRS may propose an open-ended consent, commonly Form 872-A, which keeps the period open until 90 days after the taxpayer or the IRS terminates the agreement using the prescribed notice procedure, or until the IRS issues a statutory notice of deficiency. Publication 1035 also explains that Form 872-A does not apply to employment taxes and certain miscellaneous excise taxes, so you should expect different consent forms in payroll and excise examinations.
The critical point is that the consent extends the IRS’s time to assess additional tax. It does not automatically mean the IRS has “proved” anything, and it does not eliminate your appeal rights. Publication 1035 explains that you have the right to sign an unconditional consent, negotiate consent terms, including restricted consents, or refuse to sign.
What Happens if You Refuse to Extend
You can refuse to extend. The IRS generally responds by protecting the statute through formal action, most commonly by issuing a Statutory Notice of Deficiency, which preserves the government’s ability to assess and gives you the ability to petition the Tax Court within the applicable deadline. Publication 1035 also states that the IRS will not charge a penalty for refusing to sign the consent.
Refusal, however, creates real-world consequences. The examiner may stop substantive dialogue and move the case into a proposed adjustment posture. That shift can force you to litigate or negotiate under tighter timelines, and it can increase cost and risk when you still need time to gather records, reconstruct accounting, or develop defensible explanations.
Note: On multiple occasions, we have seen IRS examiners disallow every expense you claimed during the years at issue and then promptly close the audit with a Statutory Notice of Deficiency out of spite for a clients refusal to extend the statute.
When Signing Can Help You, and How You Should Limit the Damage
Signing a consent often helps when you see a realistic path to civil resolution, but you need time to get the facts right. If the IRS pushes for an extension because the statute expiration date is approaching, you can often reduce risk by insisting on a short, fixed date extension rather than an open-ended consent. Publication 1035 explains that you can negotiate the length of the extension and limit the permission to particular issues through a restricted consent. The Code itself requires the IRS to notify you that you can refuse or limit the extension to issues or to a specific period.
You should treat “restricted consent” language as a legal instrument, not a casual annotation. Publication 1035 explains that the IRS generally prepares restrictive language and that IRS Counsel approval often accompanies restricted consents. In practice, taxpayers often gain leverage by asking the examiner to explain in writing why the IRS needs more time, what issues remain open, and what work the examiner plans to complete during the extension window. You can then calibrate the consent period and issue scope to the actual needs of the case, rather than giving the IRS an open-ended runway.
The Criminal Tax Overlay, and Why Statute Extensions Can Cut Both Ways
A civil assessment statute extension does not extend the criminal statute of limitations. Civil assessment timing sits in section 6501, while criminal prosecution timing sits in section 6531, which generally sets a three-year limitations period for internal revenue offenses, with six years for many serious tax crimes listed in the statute. That distinction matters because some taxpayers sign extensions believing they “reset” the government’s criminal clock. They do not.
Even so, you should not treat this as a purely civil paperwork decision. A longer civil tax audit can give the IRS more time to develop facts, interview third parties, and build a record that supports a willfulness or fraud theory. If you see eggshell audit risk, meaning you face civil examination with credible criminal tax exposure, you should evaluate any extension request as part of an overall criminal tax defense plan. In those cases, you often want counsel to manage the entire interaction with the IRS, control the document production process, and avoid informal taxpayer interviews that create admissions.
You should also remember that the IRS can assess tax at any time when you filed a false or fraudulent return with intent to evade tax, and it can also assess at any time when you did not file a return.
Those rules mean that a taxpayer who faces fraud-level allegations will not “run out the clock” by refusing to extend. The right strategy focuses on disciplined communications, accurate record development, and early legal control of the case narrative.
Contact the Tax Law Offices of David W. Klasing if You Are Worried About the Statute of Limitations in an IRS Audit
Contact the Tax Law Offices of David W. Klasing if the IRS asks you to sign Form 872 or any other consent to extend the time to assess tax, and you want to make a risk-controlled decision. A statute extension can help when you need time to assemble records and resolve issues in the administrative process, but it can also increase exposure when the facts invite a willfulness or fraud narrative. Publication 1035 confirms that you can refuse, negotiate the length, and request issue limitations, and the Code requires the IRS to notify you of those rights. We help clients make that decision with a clear strategy designed to keep matters civil where possible and to minimize unnecessary criminal tax risk when red flags exist.
You should also contact us if you suspect a high-risk eggshell or reverse-eggshell audit, if the IRS pressures you to give a taxpayer interview, or if the IRS starts developing a record of intent. The extension decision often interacts with larger defense steps, including how you control communications, how you structure document production, and how you prevent the government from mischaracterizing explanations as admissions. Our approach emphasizes disciplined, privilege-protected representation and proactive issue management, rather than improvisation under examiner pressure. Call the tax law offices of David W. Klasing today at 800-681-1295 or use our encrypted scheduler to book a reduced-rate initial consultation.
